I agree: bad idea. Not only will it make it impossible to get loan forgiveness, the debt cannot be discharged in bankruptcy. The lender will be able to go after your friends - even garnish their wages.

Followed up with my friend. The advisor is a debt settlement company. And they are saying to default on private student loans w/ pretty high interest rates. They say they can then negotiate a settlement.

I have heard of some debt settlement companies and financial advisors who recommend going into default on private loans. My understanding is that they want to make money by negotiating a settlement.

And while it is possible to get a settlement on private student debt, it is not likely,

Even private student loans are nearly impossible to discharge in bankruptcy. And the lenders have very strong leverage to get repaid since they can garnish wages, social security income and tax refunds.

Where is the incentive for the lender to negotiate?

In most cases, I think you end up just hurting your credit score, and paying more (the original debt plus fees and default interest).

Better to talk to the lender about some sort of forbearance or other relief. If that gets you nowhere, you may want to talk to a bankruptcy attorney about discharging some of your other debts (if any).

But avoid purposefully defaulting on any debts before talking to an attorney.